More pension reform not on tap yet

Leaders in the Democratic-controlled Legislature again appear unwilling to tackle many of the governor’s most significant cost-cutting proposals from the last two years. Among them was placing new state and local workers into hybrid retirement plans that combined a scaled down guaranteed pension with a less predictable 401(k)-style investment plan. Narrow changes are being considered.

Senate President Pro Tempore Darrell Steinberg said he doesn’t anticipate any movement toward a hybrid retirement system this year.

“I don’t think we’re going to tackle that fundamental structure again this year at least,” Steinberg said.

Instead, the Sacramento Democrat urged his colleagues to work toward stabilizing the state teachers’ retirement system, CalSTRS, which is running out of money. He also foreshadowed action on helping address the $62 billion unfunded liability for health and dental care promised to retired state workers.

California pays the health and dental costs on a “pay-as-you-go” basis while state pensions are pre-funded to allow investment returns to reduce liabilities.

Marcia Fritz, president of the California Foundation for Fiscal Responsibility, said agencies should be required to pre-fund retiree health benefits with employees paying a share. Some veteran state workers pay nothing for the lifetime benefit.

“They are empty promises otherwise, and employees should know now whether retiree health benefits will be available to them in the future,” Fritz said.

At the same time, she and others believe maintaining the status quo on pensions is not enough.

“Democrats and the unions want to think they are done,” said Dan Pellissier, president of California Pension Reform. “But for anybody who cares about unfunded liabilities and pension costs squeezing out things that we need in our government budgets, pension reform is not done. We’re still on an unsustainable path.”

A spokesman for Assembly Speaker John Pérez, D-Los Angeles, said last year’s achievement should not be undersold, and should be allowed to play out.

“Our sense is that we passed the biggest rollback in pensions in history last year and we will be saving close to $100 billion total over the next 40 years so we want to see how that works out before we move to address anything else,” said John Vigna, Pérez’s spokesman.

Sen. Marty Block, D-San Diego, supported last year’s pension overhaul and serves on the Public Employment and Retirement Committee.

“In the months ahead, the Legislature will assess the impact of that reform and the pension fund performance over the next few quarters to see how well California is meeting funding targets,” Block said. “It is still too early in the session to know what further action may be proposed by the governor or others.”

Nation, who studies spiraling pension costs at Stanford, said the looming debts will be taken care of one way or other. The question that remains is at what cost.

“What’s really not heartening about this is that every day, every year that we postpone a solution the problem grows by that much more,” he said. “It’s like someone racking up a credit card debt and assuming that somehow they’ll win the lottery the next year and the thing will go away. That’s obviously not going to happen.”